IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v55y2023ipas1544612323002441.html
   My bibliography  Save this article

Foreign ownership, heterogeneous beliefs, and stock market volatility

Author

Listed:
  • Zhao, Mengyang
  • Zhang, Lingxiao

Abstract

This paper examines the effect of foreign ownership on stock market volatility, and further explore the mediating effect of heterogeneous beliefs on the above relationship. We use the data from China's stock markets in 2015 to 2021, present evidence that foreign ownership significantly reduces stock market volatility and heterogeneous investor beliefs are mediating variables for foreign ownership in influencing stock market volatility. To verify the robustness of the results, we conduct further tests by changing the measure of heterogeneous investor beliefs and adding control variables, and all findings are consistent.

Suggested Citation

  • Zhao, Mengyang & Zhang, Lingxiao, 2023. "Foreign ownership, heterogeneous beliefs, and stock market volatility," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002441
    DOI: 10.1016/j.frl.2023.103872
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323002441
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.103872?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Yudong & Diao, Xundi & Pan, Zhiyuan & Wu, Chongfeng, 2019. "Heterogeneous beliefs and aggregate market volatility revisited: New evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 55(C), pages 127-141.
    2. Bhaskar Chhimwal & Varadraj Bapat & David McMillan, 2020. "Impact of foreign and domestic investment in stock market volatility: Empirical evidence from India," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1754321-175, January.
    3. Yunqi Fan & Fangzhao Zhou & Yunbi An & Jun Yang, 2021. "Investor Sentiment and Stock Price Crash Risk: Evidence from China," Global Economic Review, Taylor & Francis Journals, vol. 50(4), pages 310-339, October.
    4. Katsuhiro Oshima, 2021. "Heterogeneous beliefs, monetary policy, and stock price volatility," Annals of Finance, Springer, vol. 17(1), pages 79-125, March.
    5. Koosakul, Jakree & Shim, Ilhyock, 2021. "The effects of asset price volatility on market participation: Evidence from the Thai foreign exchange market," Journal of Banking & Finance, Elsevier, vol. 124(C).
    6. Han-Ting Wang & Sze-Ting Chen, 2020. "The Impact of CEO Competence Heterogeneity and Investor Risk Appetite on Corporate Bond Yield- Take the Listed Companies of the Real Estate Industry as an Example," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 6(4), pages 183-200.
    7. Fenghua Wen & Longhao Xu & Bin Chen & Xiaohua Xia & Jinyi Li, 2020. "Heterogeneous Institutional Investors, Short Selling and Stock Price Crash Risk: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(12), pages 2812-2825, September.
    8. Hao, Jing & Xiong, Xiong, 2021. "Retail investor attention and firms' idiosyncratic risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 74(C).
    9. Saif Siddiqui & Preeti Roy, 2019. "Asymmetric relationship between implied volatility, index returns and trading volume: an application of quantile regression model," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(3), pages 239-252, September.
    10. Nappo, Giovanna & Marchetti, Fabio Massimo & Vagnani, Gianluca, 2023. "Traders’ heterogeneous beliefs about stock volatility and the implied volatility skew in financial options markets," Finance Research Letters, Elsevier, vol. 53(C).
    11. Sunyoung Lee & Keun Lee, 2021. "3% rules the market: herding behavior of a group of investors, asset market volatility, and return to the group in an agent-based model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(2), pages 359-380, April.
    12. Peterson Owusu Junior & Stefan Cristian Gherghina, 2022. "Dynamic Connectedness, Spillovers, and Delayed Contagion between Islamic and Conventional Bond Markets: Time- and Frequency-Domain Approach in COVID-19 Era," Discrete Dynamics in Nature and Society, Hindawi, vol. 2022, pages 1-18, March.
    13. Vu Tran & Rasha Alsakka & Owain ap Gwilym, 2019. "Investors’ heterogeneous beliefs and the impact of sovereign credit ratings in foreign exchange and equity markets," The European Journal of Finance, Taylor & Francis Journals, vol. 25(13), pages 1211-1233, September.
    14. Rong Xu & Jialu Chang & Conggang Li & Wenlan Wang, 2019. "Research on the influence of equity pledge on stock price crash risk: based on financial shock of 2015 stock market crisis," Economic and Political Studies, Taylor & Francis Journals, vol. 7(4), pages 480-505, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhou, Jingting & Li, Wanli & Yan, Ziqiao & Lyu, Huaili, 2021. "Controlling shareholder share pledging and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    2. Thobekile Qabhobho & Anokye M. Adam & Anthony Adu-Asare Idun & Emmanuel Asafo-Adjei & Ebenezer Boateng, 2023. "Exploring the Time-varying Connectedness and Contagion Effects among Exchange Rates of BRICS, Energy Commodities, and Volatilities," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 272-283, March.
    3. Chaturvedi, Priya & Kumar, Kuldeep, 2022. "Econometric modelling of exchange rate volatility using mixed-frequency data," MPRA Paper 115222, University Library of Munich, Germany.
    4. Zheng, Yan & Zhou, Min & Wen, Fenghua, 2021. "Asymmetric effects of oil shocks on carbon allowance price: Evidence from China," Energy Economics, Elsevier, vol. 97(C).
    5. Kiran Batool, 2021. "Impact of Interest Rates on Stock Index: Case of Pakistan Stock Exchange," International Journal of Business and Economic Affairs (IJBEA), Sana N. Maswadeh, vol. 6(1), pages 1-12.
    6. Zuo, Jingjing & Qiu, Baoyin & Zhu, Guoyiming & Lei, Guangyong, 2023. "Local speculative culture and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 64(C).
    7. Wen, Fenghua & Cao, Jiahui & Liu, Zhen & Wang, Xiong, 2021. "Dynamic volatility spillovers and investment strategies between the Chinese stock market and commodity markets," International Review of Financial Analysis, Elsevier, vol. 76(C).
    8. Ren, Xiaohang & Wang, Rui & Duan, Kun & Chen, Jinyu, 2022. "Dynamics of the sheltering role of Bitcoin against crude oil market crash with varying severity of the COVID-19: A comparison with gold," Research in International Business and Finance, Elsevier, vol. 62(C).
    9. Wen, Bohui & Yan, Yulin & Hao, Jing & He, Feng, 2023. "Investors’ online searching and green knowledge dissemination," Finance Research Letters, Elsevier, vol. 54(C).
    10. Ming, Yaxin & Li, Yubo & Liu, Nian & Li, Jing, 2023. "Retail investor attention and corporate environmental performance: Evidence from china," Finance Research Letters, Elsevier, vol. 56(C).
    11. Liao, Lin & Sharma, Divesh & Yang, Yitang (Jenny) & Zhao, Rui, 2023. "Adoption and content of key audit matters and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 88(C).
    12. Tariq Mehmood & Inzamam Ul Haq & Asad Rauf & Rosa Fitriana & Buthina Alobidyeen, 2020. "Impact of Corporate Social Responsibility on Financial Performance of the Banks: Case of Banking Sector in Pakistan," International Journal of Business and Economic Affairs (IJBEA), Sana N. Maswadeh, vol. 5(6), pages 311-320.
    13. Li, ChangZheng & Umair, Muhammad, 2023. "Does green finance development goals affects renewable energy in China," Renewable Energy, Elsevier, vol. 203(C), pages 898-905.
    14. Ali Shariff Kabara & Dewi Fariha Abdullah & Saleh F. A. Khatib & Ayman Hassan Bazhair & Hamzeh Al Amosh, 2023. "Moderating Role of Governance Regulatory Compliance on Board Diversity and Voluntary Disclosure of Non-Financial Firms in a Developing Country," Sustainability, MDPI, vol. 15(5), pages 1-19, March.
    15. Li, Yan & Liang, Chao & Huynh, Toan Luu Duc, 2022. "Forecasting US stock market returns by the aggressive stock-selection opportunity," Finance Research Letters, Elsevier, vol. 50(C).
    16. Bai, Fan & Zhang, Yaqi & Chen, Zhonglu & Li, Yan, 2023. "The volatility of daily tug-of-war intensity and stock market returns," Finance Research Letters, Elsevier, vol. 55(PA).
    17. Goodell, John W. & Kumar, Satish & Li, Xiao & Pattnaik, Debidutta & Sharma, Anuj, 2022. "Foundations and research clusters in investor attention: Evidence from bibliometric and topic modelling analysis," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 511-529.
    18. Hou, Canran & Liu, Huan, 2023. "Institutional cross-ownership and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 65(C).
    19. He, Feng & Qin, Shuqi & Liu, Yuanyuan & Wu, Ji (George), 2022. "CSR and idiosyncratic risk: Evidence from ESG information disclosure," Finance Research Letters, Elsevier, vol. 49(C).
    20. Tariq Mehmood & Inzamam Ul Haq & Asad Rauf & Marina Kirilchuk, 2020. "Impact of Corporate Governance on Financial Performance of Organization: Study of Manufacturing Firms in Pakistan," International Journal of Business and Economic Affairs (IJBEA), Sana N. Maswadeh, vol. 5(4), pages 156-169.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002441. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.